This year, make finances a family affair

For the past two decades, middle-class American households have operated with an ATM mentality. The ability to withdraw money from a machine helped distance the concept of income creation from spending decisions. As long as freshly minted bills kept popping out, many parents never bothered to create a budget or discuss family financial circumstances with their children.

But as American families adjust to a recessionary economy, they are faced with difficult decisions. Many parents must weigh what they can afford more closely. No longer can they buy all of the staples often associated with middle-class lifestyles – summer camp, tutoring, private school, fashionable clothing, electronic toys, resort vacations, etc.

Parents and grandparents must actively share their new money-management practices with their families, engaging each family member, regardless of age, in open discussions of family values and financial priorities. Such discussions will educate all family members about the choices that are necessary when budgeting, spending, saving, investing, and giving to others.

Parents and grandparents can also engage in a child's financial education. The age of the child, the financial circumstances of the family, and any school resources available should be considered when customizing a program that is right for each child.

Generally, children from preschool through second grade can focus on learning to save and on spending behavior at learntosave.com/lessons. Children in Grades 3 to 6 can graduate to allowances and learn the value of interest at orangekids.com. And those in Grades 7 through high school can develop and practice sound use of debit cards and checking accounts by referring to bankhs.com/students.

"It is all about making choices and trade-offs," explains Sarah Bulgatz, director of corporate public relations for Charles Schwab. "By incorporating children into daily financial decisions, they will learn important skills of managing money."

Every day holds unlimited opportunities to initiate conversations about money: radio and television ads, billboards, and store advertisements promoting new products; excursions to the mall or grocery store; a stop at an ATM; paying bills at home.

Along the way you can discuss with older children such subjects as comparison shopping, discounts and coupons, and brand-name versus generic products.

With preschoolers, you can have basic conversations about where money that pops out of an ATM machine comes from – your paycheck – and introduce the value of work as well as what money can buy.

A visit to a local bank can also produce opportunities for financial education. Judy Fisher, branch manager of The Village Bank in St. George, Utah, welcomes a dialogue with her customers' children. "It is important for kids to learn the value of savings and compounded interest, the proper use of ATM cards, electronic banking, checking accounts, and the establishment of credit," she says.

Many financial institutions, corporations, and nonprofits are collaborating with the President's Council on Financial Literacy and state governments to provide financial educational materials to both parents and teachers. An extensive array of fun-filled websites with financial quizzes, games, and calculators to explain basic money issues are available to children starting at preschool age.

Here are some family finance activities worth consideration:

•Hold a weekly family-finance meeting – perhaps on a Sunday afternoon preceded by a pizza lunch. Discuss special family goals, such as saving for a new puppy or buying a flat-screen television. Visit practicalmoneyskills.com and schwabmoneywise.com for budgeting and spending ideas and games.

•Pay weekly allowances and set specific expectations of expenses to be paid by the child. Do not bail out a kid who runs out of money prior to a movie or date. Get advice on adjusting allowances by clicking on the "Children and Money" link at financial-education-icfe.org.

•Open a savings account for each child and match their deposits. This move is good training for 401(k) participation later in life. Learn banking skills at kidsbank.com.

•Establish checking accounts with prepaid limited debit cards for teenagers. Monitor their accounts online. For more information, visit handsonbanking.org.

•Contribute to a nonprofit. Let your children research and help choose a group or cause to support. Ask each child to set aside money from their allowance or job. Volunteering as a family will also reinforce the value of giving.

• Dr. Kathleen Connell is a professor at Haas Graduate Business School, University of California, Berkeley.